The Darkest Hour

[The Masked Tulip]

http://www.economist.com/node/18712872?story_id=18712872&fsrc=rss

I admit that I do worry about this, not for Americans but for us - i.e. the UK VIs being able to point to the US and rising prices, eventually, over there as an excuse to justify our asking prices.

Edited May 19, 2011 by The Masked Tulip

[okaycuckoo]

Calculated Risk reckons more decline on the broad index of US house prices - can't recall his percentage, up to 10% + possible overshoot - but he clearly states that it will take two years to bottom out after that.

Can't find link, but that's what he reckons. He's been very consistent since 2005.

[indirectapproach]

US housing is on its derriere for at least another two years, probably more.

The Alt-A and option Arm stuff is not yet half way through. Some 2011 respite was in all the graphs I've seen.

There was also the first time homebuyer tax credit or something.

The shadow inventory is huge. The overhang from the robo signing is still there.

I am seeing the most persuasive price falls yet in my areas of interest and my realtors tell me there is more on the way.

Any light ahead is an onrushing train.

Dawn is years away.

[Xurbia]

http://www.economist.com/node/18712872?story_id=18712872&fsrc=rss

I admit that I do worry about this, not for Americans but for us - i.e. the UK VIs being able to point to the US and rising prices, eventually, over there as an excuse to justify our asking prices.

I tend to agree that the American market is stabilising. The housing market reminds me of a stock that's been oversold by negative press. This is the time when contrarians will buy and reap the benefits later. Feels very much like the housing market in the UK back in the mid 90s.

British prices are still ridiculous by any measure. I looked at potential vacation homes up in the Cotswolds a year ago. The same places are still up for sale even though the prices have been reduced by up to 60K. Back then the idiot estate agents were telling me to buy whilst the lull lasted. This is not what I'd classify as a lull. You cannot speculate with prices any longer; that additional premium has gone.

Friends of mine back in the UK have been laid off for the first time in their careers. They are frantic with worry about the future. The last thing on their minds is buying a house. I believe the UK market will continue to fall faster and faster. There will be some sort of additional crisis that crops up soon. It might be Greece or Ireland. If Ireland reneges on its debt obligations it would hammer British banks. No, this is not a time when house prices will rise.

[spyguy]

What MojoRIsing say -when you're so far down even down looks like up.

in reference to the US housing market, just not falling like a brick is a positive sign.

The sea + sand states have been totally gutted. Hard to get figures but 70% off 2006 is not uncommon - $1M -> $300K

[indirectapproach]

That would sound very possible.

For what it's there are certainly falls from $150,000 to $50,000 in the heartland.

I don't expect prices to fall much further than that, maybe another $10,000 for the outliers but what I do expect is for a lot more decent houses to sell for that price.

Those $50,000 deals for a decent four bedroom detached bungalow are there now, but they are rare.

I expect them to become common place and as those deals weren't there last year, I may be right about that.

[swissy_fit]

That would sound very possible.

For what it's there are certainly falls from $150,000 to $50,000 in the heartland.

I don't expect prices to fall much further than that, maybe another $10,000 for the outliers but what I do expect is for a lot more decent houses to sell for that price.

Those $50,000 deals for a decent four bedroom detached bungalow are there now, but they are rare.

I expect them to become common place and as those deals weren't there last year, I may be right about that.

D'you live there, or is your interest as an investor?

[indirectapproach]

I invest.

[swissy_fit]

I invest.

Thanks.

Is it easy to have a property managed from abroad? (at a price, doubtless)

[indirectapproach]

It seems to be possible. Most things in business are in the US, including losing your shirt.

My suggestion would be to try and find a property manager that is too boring to thieve.

Of course you may have to talk to lots of funky, uber positive, interesting folk to get to who you are looking for but it's possible.

The fee for me is 9% plus half the first months rent for the finding and managing plus an unquantifiable cost in longer voids and lower rents achieved because I'm working with someone boring.

But at least I am not being stolen from (I think).

[okaycuckoo]

It seems to be possible. Most things in business are in the US, including losing your shirt.

My suggestion would be to try and find a property manager that is too boring to thieve.

Of course you may have to talk to lots of funky, uber positive, interesting folk to get to who you are looking for but it's possible.

The fee for me is 9% plus half the first months rent for the finding and managing plus an unquantifiable cost in longer voids and lower rents achieved because I'm working with someone boring.

But at least I am not being stolen from (I think).

Good for you.

Do you use price/rent ratio? Most US bloggers who know what they're talking about reckon 120 I think. Calculated risk reckons the ratios are generally closing in on the historical norm.

[swissy_fit]

It seems to be possible. Most things in business are in the US, including losing your shirt.

My suggestion would be to try and find a property manager that is too boring to thieve.

Of course you may have to talk to lots of funky, uber positive, interesting folk to get to who you are looking for but it's possible.

The fee for me is 9% plus half the first months rent for the finding and managing plus an unquantifiable cost in longer voids and lower rents achieved because I'm working with someone boring.

But at least I am not being stolen from (I think).

Your logic is similar to mine at least.

[indirectapproach]

"Do you use price/rent ratio?"

I expect 40% of my gross rent to go on federal and state taxes, management, maintenance, insurance and sundry costs.

I hope what's left will give me a net return of a smidge more than 10% of my acquisition and refurb cost.

As I understand it, the rule of thumb for the ol' timers in the business in the States was for a gross return of 12%.

Things may be closer to an historical norm than you might think.

I believe the traditional number for the grown ups in the UK was 7%.

All of which was obviously out the window in the irrational up phase of the cycle, which was all about capital gain.

Something that with hindsight comes as absolutely no surprise to my dog.

[okaycuckoo]

"Do you use price/rent ratio?"

I expect 40% of my gross rent to go on federal and state taxes, management, maintenance, insurance and sundry costs.

I hope what's left will give me a net return of a smidge more than 10% of my acquisition and refurb cost.

As I understand it, the rule of thumb for the ol' timers in the business in the States was for a gross return of 12%.

Things may be closer to an historical norm than you might think.

I believe the traditional number for the grown ups in the UK was 7%.

All of which was obviously out the window in the irrational up phase of the cycle, which was all about capital gain.

Something that with hindsight comes as absolutely no surprise to my dog.

Yes, the taxes. I was reading on maxedoutmama a couple of days ago that recovery in hight property-tax areas is expected to be slooow.

[indirectapproach]

So buy in counties where the taxes are not too high but more importantly, the county auditor will revise them down.